In the Red Corridor of uncertainty

From Bailadila in Dantewada, Chhattisgarh, begins the 267-km, 400-mm or 16-inch diametre slurry pipeline (used to transport mineral concentrate) that was commissioned by Essar Steel in 2005 at a cost of Rs 667.5 crore. The pipeline was built to transport iron ore fines from the Kirandul complex of NMDC Ltd to Essar's pelletisation unit in Andhra Pradesh, where the iron ore fines are converted into pellets (which are used to make steel).

A year ago, the part of the pipeline in Chitrangonda in Orissa—the pipeline snakes its way through three states—was blown up by one of the many Maoist groups in the region, who are fighting a bloody war ostensibly against landlords and their "agents" (which include governments). Since then the Ruias-owned Essar Steel has been unable to repair the pipeline because of differences in opinion—not between governments or the promoters of the pipeline, but between the Maoist groups in Orissa and those in Chhattisgarh!

According to local sources, some 80 km of the pipeline, which has a capacity to carry 8 million tonnes of iron ore per annum, is under direct Naxal control. The term Naxals or Naxalites is used interchangeably with "Maoists" to describe these groups, consisting mostly of tribals, who have chalked out their own rule of law in the region now infamously dubbed the Red Corridor. That corridor is only getting wider, longer—and more dangerous by the day.

WHY BUSINESS SHOULD WORRY

Orissa: Home to 33% of India's iron ore reserves, 51% of bauxite and 25% of coal and alumina.

PROJECTS PROPOSED: By Tata Steel, NALCO, POSCO and Vedanta.

VALUE OF PROJECTS PROPOSED: Roughly Rs 2,50,900 crore.

Chhattisgarh: Home to India's richest reserves of iron ore, coal, limestone and bauxite.

PROJECTS PROPOSED: By Essar Steel and Tata Steel.

VALUE OF PROJECTS PROPOSED: Roughly Rs 13,000 crore.

The ambush of 80 CRPF personnel in the jungles of Dantewada is the most recent indicator of how real the Maoist threat is and how hazardous the terrain is. Today, some 223 districts in 20 states are under the influence of the Maoists, with Chhattisgarh, Jharkhand, Orissa, Bihar and Andhra Pradesh being the worst hit. That the Naxal influence is growing alarmingly can be gauged from the fact that three years ago, the Red Corridor extended to 165 districts in 14 states. Now, the Maoists are even strengthening their stranglehold around India's IT capital, Bangalore.

It's a tough life for citizens caught in the crossfire. It's also tough for those trying to earn a living there—as it is for big business that's seeking to put up mega metals projects in the mineral-rich states of Orissa, Chhattisgarh and Jharkhand. Projects reportedly worth a little over Rs 2,50,900 crore, involving metals majors like POSCO and Vedanta, have been proposed to be set up in Orissa.

NALCO and Tata Steel are two other companies that had proposed to set up steel and aluminium plants in Orissa. As of a couple of years ago, investments in steel and power worth another Rs 13,000 crore were proposed in Chhattisgarh.

"There is a sense of panic... Ever since these recent attacks (in Dantewada), nobody is willing to come to this town," says Reena Kangle, District Collector of Dantewada. "Everybody fears the Naxals and many are rethinking their investments in this region." But the commodities giants cannot afford to ignore these states for too long.

Consider: Orissa accounts for roughly a third of the country's iron ore reserves, a little over half of bauxite and a quarter of its coal and alumina. Chhattisgarh is home to India's richest reserves of iron ore, coal, limestone and bauxite.

It's this rich kitty of reserves that pulled the likes of Essar into this corridor. However, if laying a pipeline in this deathly terrain of hills and dense jungles wasn't difficult enough, guarding it, or even attempting to repair it, is proving impossible. Result? Both NMDC and Essar suffer, NMDC because of reduced offtake of iron ore and Essar because of reduced supply as well as a higher cost of transportation.

Essar, which used to transport roughly 20,000 tonnes of iron ore fines per day to its pellet plant, now has to take the 430-km rail route. While the cost of transporting one tonne of iron ore through the slurry pipeline works out to Rs 60, by rail it shoots up by 11 times to Rs 660.

What's more, it can get only 3 million tonnes per annum by rail, as against 6 million it was transporting via the pipeline. This means that Essar has to import another 3 million tonnes of ore it needs from places ranging from Bahrain to Brazil for as high as close to Rs 2,000 per tonne.

It's not surprising, then, that the Ruias have made little progress on a 3.2-million-tonne steel plant that was proposed at Bhasi (close to Bailadila) in Chhattisgarh, despite signing a memorandum of understanding with the state government in 2005 and acquiring 600 hectares that year. Tata Steel's proposed 5.5-milliontonne unit at Lohandiguda in Bastar district is also similarly stuck. "The land acquisitions have happened by the state government but the companies are not yet ready out of fear," points out Kangle.

It's not just the big corporate houses that are being left behind in the shade of the huge red cloud. Bastar in Chhattisgarh, for instance, was once a bustling hub for iron ore mining. The district has some 75 mini steel units that produce 2 lakh tonnes of steel a month.

"The growing activities of the Naxals in Bastar are threatening iron ore mining in the sprawling forested region. The ore movement from this region has fallen after the recent attacks," says Ashok Surana, Head of Chhattisgarh Mini Steel Plant Association. "The staff going to the NMDC complexes to get delivery orders don't want to go there now out of fear of being attacked," he adds.

Even districts that aren't at ground zero are feeling the ripples of the Naxal violence. Consider Salboni in West Bengal, where JSW Steel has identified a site for a 10-million-tonne steel plant. A blast at Kalaichandi, 16 km from Salboni, in November 2008, moments after Chief Minister Buddhadeb Bhattacharjee's convoy had passed through it after laying the foundation stone for the proposed JSW Steel unit, still reverberates in that region. Says Biswadip Gupta, Managing Director, JSW Bengal Steel Ltd: "This area is not in control of the Maoists.

The conflict zone is 20-25 km away. The blast took place some 16-17 km away from here. But the battle between the joint forces and the Maoists has its ripple effect on this place. Any news of the conflict makes the entire area very tense." Kalahandi in Orissa, where Vedanta Aluminium (a subsidiary of Vedanta Resources plc) has an alumina refinery (in Lanjgarh), too, is not directly under Maoist fire, but still it is precariously close to the areas of conflict and, therefore, always vulnerable.

To be sure, one way—and, perhaps, the only way—forward for the corporates is to cultivate the trust of the locals—who live in miserable conditions—by engaging with the local people. JSW Steel, for instance, has mobile medical camps that travel through villages, is building tube wells and helping people take up animal husbandry.

Then, Vedanta is keen that the Orissa Mining Corporation mine bauxite in the Niyamgiri Hills, which the Dongriya Kondh tribe believes is the abode of their god. Vedanta is doing its bit to win people over, and succeeding slowly but surely. Mukesh Kumar, COO, Vedanta Aluminium, gives the example of a young man, Jitu Jakasika, perhaps the first graduate from the community of the hill people.

"For three years, he fought us. Just when he was on the verge of joining the Maoists, I met him and asked him what he wants." Jakasika's answer: Development for his community. "So I suggested that let us fight for that instead. Today, with our help, Jakasika is doing an MBA in Bhubaneswar and has inspired another 30 young men from his community to go for higher education," adds Kumar. Clearly, not all disgruntled tribals are Maoists, but the crossover is what's hurting India, as well as India Inc., which can certainly do its bit to halt it